Is it better tax-wise to have all bills included in the rent or bills in the names of the tenants?

ripofflondon

Hi all.
Hope this is in the right part of the forum. I have a house with 4 bedrooms which I rent out to 4 separate tenants.  To date I have been charging a monthly rent that reflects the fact that all the bills are in my name.  
Last year my income tax bill tripled and I believe this is because HMRC's rules now result in tax being charged on turnover not profits? 
So my question: from a tax point of view, am I better off putting the bills in the names of the tenants (and adjusting the rent downwards to take account of that)?

Any thoughts / advice gratefully received. 

QrizB

ripofflondon said:

Any thoughts / advice gratefully received. 

You need a better accountant.

MyRealNameToo

No, they are still taxed on profit but what's allowable expenses are changed periodically, like when they removed the ability to claim the interest on mortgages as an expense. 

How are you running your inclusive rate? Is it just a fixed uplift and you hope someone doesnt have electric heating running 24/7? Or are you passing through the actual billed amount so their rent changes all the time? 

ripofflondon

Hi all
Thanks for responses to date.  Yes I need to ask the accountant for tax advice as distinct from using them to do my tax return based on things as they are currently arranged.  

How running the rate?  It's a fixed uplift and to date the tenants have been very good about not taking the P. 

sheramber

ripofflondon said:

Hi all.
Hope this is in the right part of the forum. I have a house with 4 bedrooms which I rent out to 4 separate tenants.  To date I have been charging a monthly rent that reflects the fact that all the bills are in my name.  
Last year my income tax bill tripled and I believe this is because HMRC's rules now result in tax being charged on turnover not profits? 
So my question: from a tax point of view, am I better off putting the bills in the names of the tenants (and adjusting the rent downwards to take account of that)?

Any thoughts / advice gratefully received. 

and I believe this is because HMRC's rules now result in tax being charged on turnover not profits? 

Since when?

ripofflondon

sheramber said:

and I believe this is because HMRC's rules now result in tax being charged on turnover not profits? 

Since when?

If I am wrong then I stand corrected, but my 23/24 tax bill tripled over the 22/23 one even though nothing else had changed - I have been running the same 'all-bills-included' model since I acquired the place in 2013.  

sheramber

You can claim allowable expenses or the property allowance if you£1000, but not both. 

If your expenses are more than £1000 then you claim the expenses amount. 

Finance costs are restricted to  relief at 20%. 

Do you fill in your own return or do you have an accountant? 

silvercar

ripofflondon said:

sheramber said:

and I believe this is because HMRC's rules now result in tax being charged on turnover not profits? 

Since when?

If I am wrong then I stand corrected, but my 23/24 tax bill tripled over the 22/23 one even though nothing else had changed - I have been running the same 'all-bills-included' model since I acquired the place in 2013.  

You deduct the bills as expenses. You need to consider your profit margins, given that utility bills have increased massively since 2013. My water bill alone increased 40% this year. 

ReadySteadyPop

ripofflondon said:

sheramber said:

and I believe this is because HMRC's rules now result in tax being charged on turnover not profits? 

Since when?

If I am wrong then I stand corrected, but my 23/24 tax bill tripled over the 22/23 one even though nothing else had changed - I have been running the same 'all-bills-included' model since I acquired the place in 2013.  

What did HMRC say when you queried it?

saajan_12

ripofflondon said:

sheramber said:

and I believe this is because HMRC's rules now result in tax being charged on turnover not profits? 

Since when?

If I am wrong then I stand corrected, but my 23/24 tax bill tripled over the 22/23 one even though nothing else had changed - I have been running the same 'all-bills-included' model since I acquired the place in 2013.  

How are your taxes calculated - are you submitting tax returns and do those have the correct values? 
Non financing expenses should be deducted in full, so this doesn't matter. But there's rarely "nothing else changed" - mortgage balances (and hence interest) goes down, a bill could be accidentally left off, bills could have gone down, rent could have gone up, etc. 

ripofflondon

sheramber said:

You can claim allowable expenses or the property allowance if you£1000, but not both. 

If your expenses are more than £1000 then you claim the expenses amount. 

Finance costs are restricted to  relief at 20%. 

Do you fill in your own return or do you have an accountant? 

Thanks for response - it has been a day or 2 as I mislaid the sign-in info for this forum.  
Yes I use an accountant to prepare my tax returns.  And yes the expenses (mortgage interest, utilities etc) are EASILY in excess of £1000